The Fund fell by 1.48% in May, whilst its performance comparator of cash (as measured by the Bank of England’s Sterling Overnight Index Average (“SONIA”)) + 5% rose 0.83%. It remains positive for the year to date at 1.55%.

(Source of all figures: FE Analytics)

After a fairly flat start to the month, the UK markets fell sharply during the last week, thanks once again to inflation. Although the figures released in May showed that headline inflation had fallen, it did not fall as much as had been predicted. Of greater concern, however, was that core inflation actually rose compared to the previous month, indicating that inflation was proving stickier than previously believed.

This in turn led to forecasts for UK interest rate rises to rise, with the base rate now broadly expected to go to 5% from its current 4.5%, and some predicting it will go even higher. This is expected to have a negative effect on the economy, and as such share prices for the biggest UK companies took a sharp hit. The stock market, as measured by the FTSE 100, ending the month down 4.93% on a total return basis, with the Fund providing a good level of protection in comparison.

Although no strategies matured within the Fund during May, the proceeds from those which matured late in April were reinvested during May. Two new gilt-collateralised contracts were added, both with a maximum term of eight years, and with the FTSE CSDI as the underlying index.

The first was a step-down shape offering a potential coupon of 8.26% each year, with the level required for the strategy to mature dropping from its initial level after the second anniversary down to 90% of its starting level by years six to eight. The second took advantage of the drop in index levels towards the end of the month to add an at the money shape to the portfolio, which provided a higher potential coupon of 9.60% for each year held.

Further details of this and all the other strategies within the Fund can be found on the Fund’s website: www.UKDSF.com.

The value of this investment can fall as well as rise and investors may get back less than they originally invested.

The Fund is suitable for investors who are seeking capital growth over a medium to long term horizon but who are willing to tolerate medium to high risks due to the potentially volatile nature of the investments.

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The Lowes UK De¬fined Strategy Fund is a sub-fund of the Skyline Umbrella Fund (ICAV) and is regulated by the Central Bank of Ireland. The KIID, Prospectus, and Supplement can be accessed by visiting UKDSF.com/literature and are only available in English.

Lowes Investment Management Ltd, Fernwood House, Clayton Road, Newcastle upon Tyne, NE2 1TL. Authorised and regulated by the Financial Conduct Authority.